Budgets Go Boom, Then Bust

Published November 1, 2006

You don’t have to look hard to document the devastating results of state governments’ binge spending.

In Oklahoma, for example, year 2000 revenue collections exceeded estimates by about $250 million. The state spent all of that surplus revenue and even managed to appropriate $80 million from the “rainy day fund.”

That level of funding couldn’t be maintained when the economy took a downturn. In each of the next three years state tax revenue collections declined. In the second year, the rainy day fund went dry.

That pattern has been repeated in many other states. Money that pours into government coffers during periods of strong economic growth has been spent at a rate that can’t be sustained when the economy inevitably takes a tumble.

The result has been periods of aggressive growth in government programs followed by cuts in programs, government borrowing, deferred payments to government pensions or state vendors, tax hikes, or a combination of these moves.

Tax and expenditure limitations would end this boom and bust budgeting cycle, taxpayer advocates note.

J.D. Tuccille